If charitable giving is part of your financial life, you may have come across the term “donor-advised fund” (DAF). Over the past decade, DAFs have become one of the fastest-growing philanthropic tools in the U.S.—and for good reason.
According to the National Philanthropic Trust, DAF contributions reached $52 billion in 2022, a 28% increase from the year prior. More families, executives, and business owners are turning to DAFs to simplify their giving, maximize tax efficiency, and align philanthropy with long-term financial planning.
At VestGen, we help clients explore whether a donor-advised fund is the right vehicle for their charitable goals. Here’s what you need to know.
What Is a Donor-Advised Fund?
A donor-advised fund is a charitable investment account managed by a sponsoring organization (such as Fidelity Charitable, Schwab Charitable, or a community foundation). You contribute assets to the fund, receive an immediate tax deduction, and then recommend grants to charities over time.
Think of it as a way to separate the decision to give from the decision of where to give.
Key Benefits of a Donor-Advised Fund
1. Immediate Tax Deduction
You receive a tax deduction in the year you make the contribution—even if you distribute the funds to charities over many years.
This is especially powerful during high-income years (e.g., business sale, bonus year, or stock liquidity event).
2. Tax-Free Growth
Assets in a DAF can be invested, allowing for potential growth before they are granted to charities. That means more dollars for causes you care about.
3. Simplicity and Flexibility
A DAF consolidates your giving into one platform, with streamlined tracking, record-keeping, and grant-making tools. You can support multiple organizations while managing everything in one place.
4. Privacy
Grants can be made anonymously, which is appealing for donors who want to avoid solicitation or maintain discretion.
5. Family Engagement
DAFs offer a meaningful way to involve children or grandchildren in philanthropy. Some families establish “giving committees” or set shared goals, creating a values-driven experience across generations.
When a Donor-Advised Fund Might Make Sense
You may want to explore a DAF if:
- You experienced a liquidity event (e.g., sale of business or appreciated stock)
- You want to offset a high-income year with charitable deductions
- You support multiple charities and want a simpler process
- You want to involve your family in charitable decision-making
- You want to give anonymously
- You’re considering a private foundation but want a lower-cost, lower-maintenance option
We often help clients weigh the pros and cons of DAFs versus other giving vehicles like charitable trusts or private foundations.
Funding Your DAF: What You Can Contribute
DAFs accept a range of assets, including:
- Cash
- Publicly traded securities
- Restricted stock
- Private business interests (in some cases)
- Real estate or other illiquid assets (subject to review)
By donating appreciated assets directly, you may avoid capital gains tax and receive a deduction for the fair market value—a powerful two-fold benefit.
How VestGen Helps Clients Integrate Charitable Planning
Charitable giving isn’t just about generosity—it’s about strategy. At VestGen, we help clients:
- Identify giving goals that reflect personal values
- Evaluate the right charitable vehicle (DAF, trust, foundation)
- Coordinate giving strategies with tax, estate, and financial planning
- Engage family members in thoughtful, aligned decision-making
We don’t simply open a DAF and walk away. We help design a plan that aligns giving with legacy.
A Tool, Not Just a Trend
Donor-advised funds aren’t new—but their relevance is growing. In the right circumstances, they offer an elegant solution for families who want to give with impact, clarity, and purpose.
If you’re exploring ways to amplify your charitable giving, while also simplifying administration and improving tax outcomes, a DAF may be worth a closer look.
Ready to integrate charitable giving into your long-term plan? Reach out to a VestGen advisor for a confidential consultation.